Analysis of the challenges faced by municipalities in implementing municipal property rates Act no 6 of 2004 : the case study: three local municipalities within the Dr Kaunda District Municipality in North West Province, South Africa

Kgoete, Oupa (2022-04)

Thesis (MPA)--Stellenbosch University, 2022.

Thesis

ENGLISH SUMMARY: The Municipal Property Rates Act No 6 of 2004 was promulgated and came into effect on 2 July 2005. To this end, all municipalities in the Republic of South Africa were required to conform with the Act. The Municipal Property Rates Act (MPRA) was contemplated as a means to assist municipalities to maximise revenue through property taxes. To achieve this, the process involved developing Rates By-laws, Rates Policy and General Valuation Roll so as to enable municipalities to bill all rateable properties as per the approved General Valuation roll. The Act in its entirety, therefore, sought to assist municipalities to expand their revenue bases in an endeavour to better provide basic services and perform their constitutionally mandated functions. The implementation of the MPRA required good planning and in-depth consideration in order to achieve the smooth transition from the old to the new rating arrangements. The newly developed valuation roll needed to undergo quality assurance before implementation. Similarly, the Rates Policy needed Council approval. This study sets out to describe the revenue sources of municipalities and to understand the challenges faced by municipalities in implementing the MPRA so as to make recommendations that would enable the municipalities to realise the intentions of the MPRA. Literature review was performed, cases were analysed and a mixed methods approach was used. The mixed methods comprised in-depth qualitative interviews with key informants from the selected municipalities of the City of Matlosana, JB Marks and Maquassi Hills in Dr Kenneth Kaunda District as well as a self-administered structured survey distributed to all employees involved with the MPRA in all the three municipalities. The literature review showed that addressing all implementation risks presented severe challenges to municipalities. Many of them experienced serious problems with the implementation of the new Act. For instance, the Knysna Municipality aborted its tender enquiry for a general valuation and instead replaced it with a call for proposals. Others faced legal challenges because they do not yet have rates policies in place or if they do, these are flawed. The case analysis showed that the legal challenges resulted in severe loss of revenue. Furthermore, municipalities were slow in understanding that the new MPRA meant that traditional valuation methods could no longer be used and that the Act introduced a difference in the approach to the rates paid by different categories of ratepayers; for instance, those who owned vacant stands compared to those who owned the biggest houses in a suburb. It has taken long for many municipalities to completely understand these changes, incorporate them in their rolls and apply them in a manner consistent with the new act. Given the results of this study, it is recommended that municipalities should make a concerted effort to learn from previous experience, especially from court cases whose outcomes resulted in revenue reduction. The municipalities’ annual reports could include a section on “lesson learned” which can be addressed by the municipalities. Municipalities should implement a hybrid rate unit within their establishments, where they appoint a private and experienced municipal valuer to work with in-house valuers. The misunderstanding of the MPRA should be addressed through stakeholder outreach programmes, training and awareness, particularly in the agricultural and farming category. The education of the customers about the MPRA 2004 needs to be infused into the consultative process. This will be achieved if the municipal management plan well in advance and involve the public in everything they do, particularly on issues that involve the public’s money or properties such as the MPRA. Education and experience are important variables for municipalities to consider in hiring officials. However, it should be noted that experience can be acquired on-the-job and that in-house training can bring less experienced personnel up to speed.

AFRIKAANSE OPSOMMING: Die Wet op Munisipale Eiendomsbelasting Nr. 6 van 2004 is gepromulgeer en het op 2 Julie 2005 in werking getree. Om hierdie rede was alle munisipaliteite in die Republiek van Suid-Afrika verplig om daaraan te voldoen. Die Wet op Eiendomsbelasting (MPRA) is oorweeg as 'n manier om munisipaliteite te help om inkomste deur eiendomsbelasting te vermeerder. Om dit te bereik, het die proses die ontwikkeling van Bywette, Belastingbeleid, Algemene Waardasierol behels en om munisipaliteite in staat te stel om alle belasbare eiendomme volgens die goedgekeurde Algemene Waardasierol aan te slaan. Die wet in sy geheel, het dus gepoog om munisipaliteite te help om hul inkomstebasis uit te brei in 'n poging om basiese dienste beter te kan verskaf en hul grondwetlik gemagtigde funksies te kan verrig. Die implementering van die MPRA het goeie beplanning en diepgaande oorweging vereis om die effektiewe oorgang van die ou na die nuwe graderingsreëlings te bewerkstellig. Die nuut ontwikkelde waardasierolle is nodig om gehalteversekering voor die implementering daarvan te ondergaan. Net so het die belastingbeleid goedkeuring van die Raad benodig. Hierdie studie het ten doel gehad om die inkomstebronne van munisipaliteite te kan beskryf en om die uitdagings wat hulle in die gesig gestaar het met die implementering van die MPRA te kan verstaan om aanbevelings te kan maak wat die munisipaliteite in staat sal stel om die bedoelings van die MPRA te kan verwesenlik. 'n Literatuuroorsig is uitgevoer, gevalle is ontleed en 'n gemengde metode-benadering is gebruik. Die gemengde metode het bestaan uit in-diepte gestruktureerde onderhoude met sleutelinformante van die geselekteerde munisipaliteite van die Stad Matlosana, JB Marks en Maquassi Hills in Dr Kenneth Kaunda Distrik, asook 'n selfvoltooide gestruktureerde opname wat aan alle werknemers betrokke by die MPRA, in al drie munisipaliteite gestuur is. Die literêre oorsig het getoon dat die aanspreek van al hierdie implementeringsrisiko's ernstige uitdagings vir munisipaliteite inhou. Baie van hulle het ernstige probleme met die implementering van die nuwe wet ondervind. Die Knysna Munisipaliteit het byvoorbeeld sy tenderondersoek vir 'n algemene waardasie gestaak en dit eerder met 'n aanbod vervang. Ander het voor regsuitdagings te staan gekom omdat hulle nog nie tariefbeleide in plek gehad het nie, of as hulle dit het, is dit gebrekkig. Die saakontleding het getoon dat die regsuitdagings ernstige verlies aan inkomste tot gevolg gehad het. Munisipaliteite was ook traag om te verstaan dat die nuwe MPRA beteken het dat tradisionele waardasiemetodes nie meer gebruik kan word nie en dat die Wet 'n verandering ingestel het in die benadering tot die tariewe wat deur verskillende kategorieë belastingbetalers betaal word; byvoorbeeld diegene wat leë erwe besit het in vergelyking met diegene wat die grootste huise in 'n voorstad besit het. Dit het lank geneem vir baie munisipaliteite om hierdie veranderinge heeltemal te verstaan, dit in hul rolle te inkorporeer en dit op 'n wyse wat ooreenstem met die nuwe wet, toe te pas. Gegewe die resultate, word aanbeveel dat munisipaliteite 'n daadwerklike poging moet aanwend om uit vorige ondervinding te leer, veral uit daardie hofsake waarvan die uitkomste inkomstevermindering tot gevolg gehad het. Die munisipaliteite se jaarverslae kan 'n afdeling oor "lesse geleer" insluit wat deur die munisipaliteite aangespreek kan word. Munisipaliteite moet 'n hibride tipe tariefeenheid binne hul ondernemings implementeer, waar hulle 'n private en ervare munisipale waardeerder aanstel om met interne waardeerders te werk. Die misverstaan van die MPRA moet aangespreek word deur die uitreik/opleiding/bewusmaking van die belanghebbendes, veral in die landbou- en boerderykategorië. Die opvoeding van die klante omtrent die MPRA 2004 moet in die konsultasieproses ingewerk word. Dit sal bereik word as die munisipale bestuur vroegtydig beplan en die publiek by alles wat hulle doen betrek, veral oor kwessies wat die publiek se geld of eiendomme soos die MPRA insluit. Onderwys en ondervinding is belangrike eienskappe wat munisipaliteite in ag moet neem by die aanstelling van amptenare, maar daar moet kennis geneem word dat ondervinding in die werk opgedoen kan word en dat interne opleiding minder ervare personeel tot voordeel kan strek.

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